The failure of anti-Lingo-1 as the first drug to reverse multiple sclerosis sent Biogen Inc. (BIIB 2.03%) reeling. Anti-Lingo-1 was one of the biotech Goliath's most promising pipeline drugs, but Biogen remains a dominant player in multiple sclerosis. Should investors ride out the storm or pack their bags and go home?
In this clip from The Motley Fool's Industry Focus: Healthcare podcast, analyst Kristine Harjes and Todd Campbell debate whether now is a good time for investors to buy Biogen's stock.
A transcript follows the video.
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This podcast was recorded on June 8, 2016.
Kristine Harjes: I want to turn to the last topic of the day which is Biogen as a general stock within the healthcare space is not your typical high-risk, high-reward stock, but they have a couple of trials going on that are fairly risky. They're not obvious wins. There is a lot of hope tied to this one particular trial -- that was known as the SYNERGY trial -- that was in multiple sclerosis and, unfortunately, had pretty bad news delivered yesterday. That the drug, anti-LINGO, failed to meet both primary and secondary endpoints.
Todd Campbell: Biogen is a biotech goliath. They get tons of financial firepower. That financial firepower is being used to take a couple of moonshots. One of those moonshots was this drug that you just mentioned, anti-LINGO-1. They were studying anti-LINGO-1 as a potential first ever drug that could be used to reverse the effects of multiple sclerosis. If you follow Biogen at all, and I'm sure some of our listeners have, they are already a giant in multiple sclerosis treatment. However, all of their therapies simply delayed disease progression. They don't reverse the course of this disease. Unfortunately, the trial result showed that anti-LINGO-1 wasn't effective, and it actually didn't even slow the progression of the disease. It's kind of a lose-lose in that regard.
Harjes: This was extremely disappointing because the drug was hoped to be the first ever drug to be able to actually repair the damaged myelin sheath that is involved with this disease so to actually be able to reverse it.
Campbell: Right. The myelin sheath that basically covers part of the cell in the central nervous system that allows for the fast transmission of signals. Once it gets damaged by... It's usually damaged by inflammation or immune system reaction. That signaling gets thrown out of kilter, if you will. That causes the symptoms of the disease. If you could repair the myelin sheath, then theoretically you could restore that fast signaling. Unfortunately, that didn't happen in this trial.
Harjes: That being said, Biogen is still the market share leader in what is roughly a $17 billion market for multiple sclerosis. Why is that so hard to say? MS treatments. The company was down 12.7% yesterday, which for a stock that huge, that's a really, really large tank. The question that I have for you, Todd, we'll wrap up the show with it, going forward, is Biogen a buy, a sell, or a hold?
Campbell: It's a buy. It's a buy. Listen, this is a biotech goliath that's on the same level as owning a Celgene (NASDAQ: CELG) or a Gilead (NASDAQ: GILD). It needs to be a core holding in biotechnology portfolios. They still got tons of drugs in the pipeline. They're doing some really interesting research on Alzheimer's disease. They're fairly well-insulated from competition in multiple sclerosis. They're growing their top and the bottom line still.
I think that this is a stock that people tuck in. They buy it on sale and they recognize that, yes, trials fail. Some trials will succeed. On balance, Biogen has, I guess, the financial firepower to get it through those stumbles like it endured this past week.
Harjes: I have to say I don't disagree with you much, but I actually am not quite as bullish here. It seems to me like they might be losing grip on the MS market a little bit. You have new therapies coming to market. You've got Novartis (NYSE: NVS) with Gilenya. Biogen right now, it seems to be relying pretty heavily on these moonshots. They had anti-LINGO-1 and we just discussed that whole story and how disappointing that was. They have another Alzheimer's candidate that is also as much, if not more of a moonshot. It could be huge. To me, when I'm looking at buying a big relatively safe biotech, I don't want to buy it because of small-chance moonshots.
Campbell: Well, I'll give you that. Alzheimer's disease especially is extremely hard to treat. There are no cures. The failure rate in clinical trial is about 99%.
Harjes: Yet, I still think a lot of the valuation of this company is tied to hopes for that drug.
Campbell: I don't know. You're only paying 12 or 13 times earnings to buy this company right now. I think that they'll be OK. I think that they'll be able to... Even if their pipeline doesn't generate out, the multibillion dollar blockbusters, I think they still have plenty of interesting opportunities. I also like the idea of owning it to get the potential for the spin-off of its hemophilia drugs later this year. That's a whole other show.
Harjes: Yeah. We could probably do an entire show about Biogen. We'll add it to the idea's list.
